Hefei mounts quest for a high-end industrial future

The Anhui provincial capital is rolling out the infrastructure mat to become the model of a modern inland manufacturing metropolis

PUBLISHED : Saturday, 23 March, 2013, 12:00am
UPDATED : Saturday, 23 March, 2013, 5:02am

The Anhui capital of Hefei may be 500 kilometres inland from the country's financial heart of Shanghai but the provincial city has ambitions to become a player in the business world.

Over the past year, it has defied the national decline in foreign direct investment, and already attracted multinationals such as Unilever, Coca-Cola and Hitachi Construction Machinery to set up shop, thanks to lower wage and land costs, according to city mayor Zhang Qingjun.

Now it plans to build on those gains by rolling out an infrastructure programme of road, water, power and rail networks to lure more business from the coast. "The trend of businesses moving inland from coastal regions is becoming very clear," the 49-year-old mayor said. "Our priority is to establish high-end manufacturing as well as research and development facilities."

The trend of businesses moving inland from coastal regions is becoming very clear. Our priority is to establish high-end manufacturing as well as research and development facilities
Hefei city mayor Zhang Qingjun

Those ambitions were aided last year with Beijing's approval of a joint venture between Anhui Jianghuai Automobile and the US truck company Navistar to make diesel engines in the city. Taiwan's Uni-President food giant and Hitachi were also planning to expand their facilities in Hefei, Zhang said.

The migration of funds to Hefei is reflected in the 43.9 billion yuan (HK$54.9 billion) in direct investment in the city in the first two months of the year. That amounted to a 20 per cent year-on-year increase, with 94 per cent of the total coming from other provinces, he said.

Over the same period, Hefei's exports more than tripled year on year while the mainland's exports rose by less than a quarter.

In terms of infrastructure, the city had already spent 40 billion yuan building its first two subways, and more were planned, Zhang said. Overseas and private investors, including Hong Kong's MTR Corporation, had expressed interest in the subway projects, as well as rail schemes throughout the province, Zhang said.

"We have had initial contact with MTR," he said, adding the company was concerned about potential economic returns from subway operation due to government price regulation.

The infrastructure expansion goes beyond the capital. The provincial authorities are studying a plan to build short, high-speed intercity rail links, including between Hefei and Wuhu over the next 10-15 years, with the construction of the first line likely to start next year, he said.

The link would cut travel time between the cities to less than one hour, he said.

The plans dovetail with a national strategy to shift more manufacturing facilities to the central and western regions to create more sustainable growth. They are also designed to prevent loss of foreign investment to countries such as Vietnam and India due to rising labour costs in the more affluent Pearl River and Yangtze River deltas. Societe Generale estimates that the wages of mainland migrant workers grew nearly 20 per cent annually in 2010 and 2011 from around 10 per cent per annum between 2003 and 2008. Zhang said the average wage in the city of six million people remained low, at about 3,200 yuan a month.

Meanwhile, Hefei had more higher-end industries, compared to the labour-intensive manufacturing of neighbouring countries, he said. "I'm not worried about losing business to them," he said.